In traditional financial transactions, consumers often used cash or personal checks in order to pay merchants for goods or services. Over time, credit cards and other types of payment cards gained mainstream use. However, using a payment card may require the consumer, merchant, or both to pay a processing fee to a payment processor for processing payment across traditional payment network process paths, i.e., payment rails. Because of the existence of processing fees, some merchants set a minimum transaction amount that is required when a payment card is used. Merchants might accumulate small charges over a period of time, but it is not uncommon for the accumulated amount to still be small and the transaction fees erode the value of the transaction for the party paying the fees.
At the same time, consumers are entering more and more financial transactions with merchants for smaller and smaller amounts. These micropayment transactions will at times be for a payment amount that is small and even less than the costs of processing the transaction, such as transactions for things like digital music and other content that might be worth less than a dollar or even pennies. This can result in a higher expense to the consumer, higher costs for the merchant, loss of revenue to payment processors, or others depending on the circumstances. Some merchants have taken to using an alternative currency for transactions for their own transactions, and exchanging the alternative currency with real currency in commercially acceptable amounts, as to minimize processing costs. For instance, a consumer might buy a certain number of points (e.g., Microsoft Points™) or virtual currency (e.g., Linden Dollars™) for a set number of real dollars, with the points or virtual currency being available for purchases associated with the merchant or being limited to a particular merchant or merchant family or association (e.g., Discover Coins),. This is a form of prepayment.
However, such systems often leave a consumer with residual alternative currency that they will not use. In addition, multiple merchants with unique alternative currencies can be confusing and hard to manage for consumers, who must be aware of different exchange rates, values, purchase denominations, amount they have prepurchased, and more. Further, if a consumer utilizes multiple alternative currencies, residual amounts of each currency can compound into a large monetary loss for the consumer. Thus, a demand exists for a technical solution to the problems presented by the commercial need for making virtual currency, and in particular, micropayments available at an acceptable cost, particularly one accepted across multiple merchants. Further, the conversion between virtual currency and real currency is problematic, requiring specific software that is generally specific to a merchant, merchant family, or association. What is perceived to be needed is a technical solution so that virtual currency can be used across broad segments of the world economy by a central and/or worldwide recognized entity to make it a cross-border, universal, or worldwide universal virtual currency.